Published: June 6, 2013 at 9:38 am

How many readers wish they could handily outperform the S&P 500 each year and easily sleep at night?

It turns out, there’s a unique stock that has beaten the broader market over nearly every time frame. And while this company may not be the next multi-bagger in your portfolio that delivers exponential returns, it hasn’t disappointed in delivering consistent, stable returns that readers can feel good about day in and day out.

Furthermore, when push comes to shove, we care about the return earned in our portfolio and not the names of the companies that got us there. In other words, not all of us need to boast about owning the latest, hottest, high-flier such as Chipotle Mexican Grill, Inc. (NYSE:CMG) or Lululemon Athletica inc. (NASDAQ:LULU). So enough suspense, what’s the name of this tried and true company?

Consider General Mills, Inc. (NYSE:GIS), the $30 billion manufacturer and marketer of consumer food products such as Cheerios, Haagen-Dazs, and dozens of other brands. The company has delivered superior returns than the S&P 500 dating all the way back to 1982. Earlier this year, I had the great pleasure of meeting with Penny Leporte, Director of Investor Relations at General Mills, during her visit to South Florida.

Here’s several insights I gleaned from Ms. Leporte, as well as reasons why I believe General Mills will continue to deliver superior long-term returns:

General Mills, Inc. (NYSE:GIS) is enjoying balanced growth across its portfolio of brands, including valuable names such as Haagen-Dazs. Sales of ice cream – a discretionary purchase – rose 6% in Europe during fiscal 2012, an impressive figure considering the high unemployment rate and persistent recession. China sales grew a massive 30% during FY2012.

On May 30, the company affirmed its 2013 EPS guidance of $2.66–$2.68, giving the stock a 17.5x forward earnings multiple. General Mills, Inc. (NYSE:GIS) also reiterated its guidance for high single-digit growth in diluted earnings per share for fiscal 2014, consistent with my long-term investment thesis.

International consolidated sales are expected to surpass $5 billion in fiscal 2013, a significant increase over the $4.2 billion for the prior year. During the recent third quarter, international sales grew 24% year-over-year for the 13-week period.

Consistent and/or growing market share in categories such as cereal indicates that General Mills, Inc. (NYSE:GIS) has been successful in passing on higher input costs to consumers. Commodity pressures have abated in the last 12 months, which should help operating profits to expand.

Long-term growth will continue to be driven by innovation and smart acquisitions. Cascadian Farm Organic has grown 17% annually for the last five years, while bolt-on purchases such as Larabar and Food Should Taste Good will drive incremental sales.

In addition to the positives above, General Mills, Inc. (NYSE:GIS) has a formula for delivering a double-digit total shareholder return in the future. The company has provided a formula of low-single digit growth for net sales + mid-single digit growth for segment operating profit = high-single digit growth in earnings per share.

General Mills Performance vs. S&P 500

Calendar Years

General Mills

S&P 500

1982–2012

13%

11%

1992–2012

9%

8%

2002–2012

9%

7%

2007–2012

11%

2%

A Five-Year Lookback at a Growing Dividend

Payment

$0.86

$0.96

$1.12

$1.22

$1.32

Annual Increase

–

11.6%

16.7%

8.9%

8.2%

Fiscal Year

2009

2010

2011

2012

2013

When combining high-single digit EPS growth with a rising dividend yield, General Mills is poised to deliver superior double-digit returns for many years to come.

Time to rotate within consumer products

Campbell Soup Company (NYSE:CPB) and The Procter & Gamble Company (NYSE:PG) are two consumer products giants that have earned news coverage in recent weeks.

Shares of Campbell Soup Company (NYSE:CPB) have gone parabolic in 2013, rising from $35 in January to a high of $48.83 in mid-May. Investors are buying a growth story at Campbell, but the long-term sustainability of recent sales remains in question. The company reported a better-than-expected third quarter on May 20, driven by growth with the acquisition of Bolthouse Farms. However, on a 12-month basis, revenue has risen 8.7% and earnings are flat despite the stock rising nearly 50%. I recommend that readers sell Campbell and invest elsewhere.

The Procter & Gamble Company (NYSE:PG) has also posted remarkable gains this year, despite poor financial results which became validated by the unexpected leave of CEO Bob McDonald and return of former chief executive A.G. Lafley.

The Cincinnati, OH headquartered P&G posted weak Q3 results back on April 24; a lack of organic sales growth is the primary concern. Sales and market share of beauty and grooming products, including hair care, deodorant, and razor blades, declined during the January to March 2013 period based on competitive pressures. Shares of P&G appear very expensive based on any valuation metric, including price-to-earnings, price-to-sales, and price-to-cash flow.

Foolish takeaway

I believe readers should spend less time searching for the next multi-bagger and gratefully accept the impressive long-term returns of General Mills, Inc. (NYSE:GIS) with arms wide open. While I do not intend to discourage your search for the next Apple or Google, humans have a natural tendency to look far and wide for solutions when the best answer often lies right in front of us.

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